Skip to content
Off the back of January’s approval of 11 spot Bitcoin ETFs, the US Securities and Exchange Commission’s (SEC) Ethereum exchange-traded fund (ETF) approval hit the headlines on the 23rd of May 2024. The hot Bitcoin topic had barely had time to cool off before the SEC approved this second and highly anticipated set of crypto ETFs. Although the decision came as somewhat of a surprise to the crypto community, it followed a series of requests from the Nasdaq, NYSE, and CBOE exchanges to alter existing rules and allow Ethereum exchange-traded products (ETPs) and ETFs onto the market. In January 2024, the Bitcoin ETF approval was followed by a surge in value and an all-time high for the popular cryptocurrency as an influx of investment flooded into the new securities. Might the same be expected from Ether in the wake of this momentous move?
This article takes a closer look at exchange-traded funds (ETFs), the second-largest cryptocurrency on the market, Ethereum, and the impact these new securities might have on the broader crypto market.
What are exchange-traded funds (ETFs)?
A cryptocurrency exchange-traded fund (ETF) is an investment security that tracks and reflects the price performance of cryptocurrencies by investing in a related portfolio. Unlike buying cryptocurrency directly, crypto ETFs trade on regular stock exchanges, which allows investors to include them in a standard investment portfolio alongside other assets such as stocks and bonds. They also only provide traders with exposure to crypto prices without them directly owning the assets. This greatly simplifies the investment process, allowing more traditional investors who are more comfortable with the structure of ETFs to stake their claims rather than dealing with the complexities of crypto exchanges and wallets. Accessing cryptocurrency through an ETF on a stock exchange can also provide investors with an extra layer of protection, security, and market stability, given that the asset is more regulated than crypto itself. While this approval could help increase Ether’s value, many crypto natives frown on the decision, preferring crypto to remain completely decentralized and away from potential institutional investment.
A brief history of Ethereum and Ether
Ether, the cryptocurrency, and Ethereum, the blockchain, were created in 2013 and launched in 2015. Upon their launch, 72 million coins were released into circulation and distributed to individuals who helped fund the initial project. The main objective behind the Ethereum blockchain was to develop a decentralized platform for software developers to build upon, offering the possibility to lead new (at the time) developments in blockchain technology, such as smart contracts and Dapps, which offer greater blockchain-based possibilities. Since its creation, the Ethereum network has undergone several upgrades, known in the tech world as ‘hard forks,’ to solve issues and introduce new features. Whilst Ethereum can be and is often used to support crypto payments and transactions, it was originally designed to go beyond financial use cases, such as those enabled by Bitcoin. With the recent approval of Ethereum ETFs, the network’s impact is set to grow as the crypto space’s evolution continues.
The Ethereum ETF impact
The SEC’s approval of these Ethereum ETFs is set to significantly impact the crypto space by enhancing Ethereum’s credibility and accessibility among the wider investment community, expected to attract substantial interest from both institutional and retail investors. Alongside the Bitcoin ETF approval in January 2023, the regulatory agency appears to be getting more comfortable inviting cryptocurrency into the mainstream. As regards Ether’s value, following the announcement that an Ethereum ETF would be approved, the coin’s value increased by around 30% in a matter of days, reflecting the rise in bitcoin’s value following its ETF approval.
Bitcoin also seemed to correlate with Ether’s rise in value over the same time period, which suggests that even though this recent approval is focused on Ethereum, it will, in fact, positively impact other cryptocurrencies on the market. As the total crypto market cap (Bloomberg) sits just below all-time highs of $2.6 trillion, analysts ask whether other cryptos, such as Solana, could be next in line for an SEC-approved ETF. Could we be on the verge of an era of broad crypto acceptance into mainstream finance? If so, such public adoption by the largest financial institutions in the world will likely increase its utility as a means of exchange and encourage non-tech industries around the world to embrace the technological developments made possible by the blockchain.
Whatever happens, it seems the crypto industry is in the good books, making the future of crypto look very bright indeed.
To learn more about crypto as a form of payment, and how, as a merchant or business, to accept crypto payments from your customers, visit www.forumpay.com, or get in touch with our sales team to discuss any questions you may have.
